€xp€rt4x
Recommendations that change your life
Disclaimer:-The information on online Forex trading presented on this website should not be regarded as forex or currency trading advice. Currency trading and fx
trading is highly speculative and should only be done with risk capital. Foreign Exchange prices rise and fall and past performance from currency trades is no
assurance of future performance. This online forex trading website is a currency trading information website only. Accordingly, we make no warranties or
guarantees with respect to the correctness or validity of its content. Forex traders making use of the online currency trading information presented do so at their
own risk. The information provided herein does not take into account their forex investing objectives, financial situation or needs of any particular person. This site
is not intended to by used as the only source of currency trading information or forex education. It is important and assumed that traders use sound trading
principles when using the online forex trading information on this currency trading site. This includes trading common sense, sound money and risk management
and full personal ownership of any trading decisions. Investors should obtain individual financial advice based on their own particular circumstances before
making any foreign currency investment decision.
|
The opportunities of trading the Forex hedged grid system
|
The opportunities of trading the Forex hedged grid system
Mary McArthur ( marymacarthur@expert4x.com ) is an Expert4x trader who provides
technical input into the services provided by www.forextradersupportservices.com.
As an expert, she authored a free hedged grid trading course on www.expert4x.com
.
I have seen the hedged grid system been used successfully (and highly
unsuccessfully) over the last few years. Unfortunately the failures tend to discourage
traders from taking advantage of this great system. I have found that the failures are
mainly due to ignorance, impatience and greed (common reasons for trading failure).
In a nutshell the grid system uses the following methodology. You start by buying and
selling a currency. When the price moves a predetermined distance (grid leg) you
cash in the positive leg, leave the negative leg and buy and sell again. Sooner or later
the system goes positive and you would then cash in when it is positive.
This is a brief summary of the content of our free hedged grid trading course
available on expert-4x.com. Please refer to this course for more details of how money
is made. The attraction is that the system is reasonably mechanical, can be
programmed and does not take much supervision as exclusively entry orders are
used.
Money is made when the price retraces 100%, 50%, 33% at various levels. This
starts looking like a strategy that supports the Fibonacci concept. The grid system is
also based on the nature of the market to trade sideways 80% of the time and to
trend 20% of the time.
The dangers are that what if the price does not retrace and continues to trend. The
Grid system can not make money in a trending market – full stop. One has to realize
that. You therefore need Strategies to minimize damage during these periods:-
Firstly I have found that the biggest mistake made by traders is that they select a very
small grid leg sizes e.g. 20 to 30 pips. This is a recipe for disaster. The trick is to use
big leg sizes between 150 and 300 pips. What this does is that it sometimes turns a
trending phase into movement in a sideways market. I would typically use 300 pips
for the GBPJPY and 150 pips for the EURUSD for instance.
Secondly there is no rule that says that the legs have to be the same size. So I
change my leg sizes in trending markets to be even bigger. If I started with 150 for the
1st leg I would go to 200 for the 2nd leg and 250 for the 3rd leg etc. This makes sure
that I am carrying less loss making transactions in a trend.
Thirdly – sometimes it is wise to increase the number of lots with the trend compared
to the numbers against the trend in a good trend. However be aware of having the
same number of sell and buy transactions. All you will have done was lock in your
current status in a 100% hedge.
Fourthly – This is the biggest change and most important one that I personally have
made in my grid trading strategy. Always cash in all your transactions when your
system is positive and when the price reaches the end of one of your grid legs. By
cashing in you are reducing the risk of carrying negative lots in a trending market.
This also gives you an opportunity to re-assess the market conditions.
Fifthly:- Cash in a start again is always an option. One of my strategies is to cash in
all my open positions when the 3rd leg of my grid is reached and start again.
Experience has taught me that this is a short term pain that goes away very quickly
and is soon forgotten.
People that have traded the grid system will immediately see how the above
approaches will reduce the risks of exponential losses building up in a strongly
trending market. Please feel free to contact Mary McArthur at marymcarthur@expert4x.
com for clarification on any items discussed above. She has numerous examples of
successful applications of grid trading
This article is part of a series and many more will follow on Grid trading, money
management and Forex Trading Strategies.